Size of business

Question 1

Revenue

Answer 1

The total value of sales made during the trading period=selling price x quantity sold.

Question 2

Capital employed

Answer 2

The total value of all long-term finance invested in the business.

Question 3

Market capitalisation

Answer 3

The total value of a company’s issued shares.

Question 4

Market share

Answer 4

Sales of the business as a proportion of total market sales.

Question 5

Organic growth

Answer 5

Expansion of a business by means of opening new branches, shops or factories (also known as internal growth).

Question 6

External growth

Answer 6

Business expansion achieved by integrating with another business by either merger or takeover.

Question 7

Horizontal integration

Answer 7

Integration with a business in the same industry and at the same stage of production.

Question 8

Vertical integration

Answer 8

Integration with a business in the same industry.

Question 9

Forward vertical integration

Answer 9

Vertical integration with a customer business.

Question 10

Backward vertical integration

Answer 10

Vertical integration with a supplier business.

Question 11

Conglomerate integration

Answer 11

Integration with a business in a different industry.

Question 12

Synergy

Answer 12

Literally means that ‘the whole is greater than the sum of parts’-it is often assumed that the new business will be more successful than the original separate businesses.

Question 13

Strategic alliance

Answer 13

Agreement between two organisations to commit resources to achieving a specific objective while remaining independent.